A salaried individual earning Rs 15.85 lakh annually can reduce tax liability to zero under the new tax regime — but only with careful salary structuring. Here’s a detailed breakdown of deductions, employer contributions, rebate rules, and expert insights explaining when and how this is possible.
Rs 15.85 lakh annual salary, Rs 0 tax? Here’s how new tax regime makes it possible (AI-generated image)
Earning Rs 15.85 lakh a year and still paying zero income tax may sound too good to be true. But under the new tax regime, it is possible — if your salary is structured smartly and certain conditions are met.
At the heart of this calculation is a simple principle: reduce your taxable income below Rs 12 lakh, and the rebate available under the law wipes out your entire tax liability.
But as tax experts caution, this is not automatic — and definitely not applicable to everyone.
How the zero-tax calculation works
Let’s first understand the math.
A salaried individual earning Rs 15.85 lakh annually can reduce taxable income by using a mix of standard deduction and employer-driven components such as EPF, NPS, and meal vouchers.
Here’s a simplified version:
Gross salary: Rs 15,85,000
Less:
Standard deduction: Rs 75,000
Employer EPF contribution: Rs 95,100
Employer NPS contribution: Rs 1,10,950
Meal vouchers: Rs 1,05,600
Net taxable income: Rs 11,98,350
At this level, the tax liability comes to around Rs 59,835. However, since taxable income is below Rs 12 lakh, the rebate of Rs 60,000 available under the new tax regime fully cancels this tax — bringing the final liability down to zero.
Why salary structuring matters
According to Deepesh Chheda, Partner at Dhruva Advisors, the new tax regime has changed how tax planning works.
“The new regime blocks most employee-claimed deductions like HRA, Section 80C and 80D. However, employer-side structuring — such as NPS contributions, meal benefits and non-cash perquisites — still remains effective,” he explains.
In simple terms, earlier you could save tax by investing. Now, how your salary is designed matters more than how you invest.
Chheda adds: “The goal is to bring taxable income below ₹12 lakh so that the rebate wipes out the entire tax liability.”
However, he highlights three key conditions:
1. The employer must actively restructure the CTC
2. All exemptions should be properly documented and policy-backed
3. The structure should be in place from the beginning of the financial year
“Retrofitting mid-year can create TDS mismatches and compliance complications,” he warns.
Expert breakdown: How the numbers can work
A more detailed illustration shared by Chheda shows how structuring plays out:
| Component | Working | Amount (₹) | Basis |
| Basic Salary | A | 8,00,000 | — |
| Other Allowances | B | 7,85,000 | — |
| Gross Salary | C = A + B | 15,85,000 | Employer PF not included in gross |
| Less: Employer NPS | D = 14% of A | (1,12,000) | Deduction allowed |
| Less: Meal Vouchers | ₹200 × 2 × 22 × 12 | (1,05,600) | Non-cash benefit |
| Less: Reimbursements | — | (1,02,400) | Laptop, mobile, etc. |
| Salary after structuring | G = C – D – E – F | 12,65,000 | — |
| Less: Standard Deduction | — | -75,000 | Fixed |
| Net Taxable Income | — | 11,90,000 | Below ₹12 lakh threshold |
This keeps taxable income below Rs 12 lakh — making the taxpayer eligible for rebate and resulting in zero tax.
But here’s the reality check
While the math works, experts stress that this is not a default outcome.
Alok Vasant, Tax Counsel at KBD Partners, says: “Nil tax at this income level is not generally achievable but only possible in specific, optimised scenarios.”
He explains that a standard salary structure will not deliver this result.
“It requires a carefully structured compensation package where a portion of the salary is allocated to components that are either deductible or not taxable under perquisite rules.”
In other words, unless your employer supports such structuring, this strategy won’t work.
Key assumptions behind zero tax
To achieve this outcome, several conditions must be met:
-Standard deduction of Rs 75,000 is fully applied
-Employer contributions to NPS and EPF are within limits
-Meal vouchers and reimbursements are part of salary structure
-No income is taxed at special rates (like capital gains)
-All components comply with tax rules
-Most importantly, taxable income must remain below Rs 12 lakh.
Summing up…
The idea of paying zero tax on a Rs 15.85 lakh salary is not a loophole — it’s a result of careful salary design under the new tax regime. But it’s not something most salaried individuals can achieve on their own. It depends heavily on employer policies, proper structuring, and strict compliance.
So while the numbers look attractive, the real takeaway is this. Under the new regime, tax saving is no longer just about investing — it’s about how your salary is built.
Disclaimer:
This article is for informational purposes only and is based on a hypothetical salary structure to illustrate how tax liability may be reduced under the new tax regime. The example assumes specific employer-led structuring of compensation, including components such as employer contributions to EPF and NPS, meal vouchers, and reimbursements, along with eligibility for rebate under applicable provisions of the Income-tax law.
Actual tax liability may vary depending on an individual’s salary structure, employer policies, income composition, and compliance with prescribed rules. Not all employers may offer such structuring, and certain exemptions or perquisites discussed may be subject to interpretation, documentation requirements, and applicable limits under tax laws.
Readers are advised to consult a qualified tax professional or financial advisor before making any decisions based on this information.
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